NIA Life Agent cheat sheet

Insurable interest in life insurance must exist at proposal (policy inception); it need not continue at death, unlike property insurance where it must exist at loss.

Utmost good faith (uberrimae fidei) obliges the proposer to disclose all material facts; material = facts a prudent underwriter would consider in accepting or rating the risk.

Indemnity does not apply to life insurance because a human life cannot be valued in money; life policies are benefit policies paying the agreed sum assured.

Subrogation and contribution are absent in life insurance; a nominee/beneficiary may also claim from a third-party tortfeasor without the insurer recovering that amount.

Proximate cause: the nearest efficient cause of loss determines liability; in life cover, suicide exclusion clauses and their time limits override this general rule.

Risk pooling: insurer collects premiums from many lives so the fund pays claims of the few; mortality tables (e.g., LIC 1994-96, IALM 2006-08) price this pooling.

Reinsurance transfers part of the risk to another insurer; it does not alter the original contract between policyholder and insurer.

Moral hazard arises from dishonest intent of the insured; adverse selection arises when high-risk lives buy cover disproportionately. Both are managed by underwriting.

Term insurance: pure protection, no maturity value unless a return-of-premium variant is purchased; pays sum assured only on death within the term.

Whole life: cover for the entire lifetime with a guaranteed death benefit; premium may be limited-pay (e.g., 10, 15, 20 years) or payable to age 100.

Endowment: pays sum assured plus bonuses on survival to maturity, or to nominee on earlier death; combines protection and savings.

ULIP: premium split into risk cover and investment; units are allocated at NAV, with charges (allocation, mortality, fund management, policy administration) capped by IRDAI rules.

Money-back policy: survival benefits paid at fixed intervals as a percentage of sum assured; death benefit is full sum assured (not reduced by paid survival benefits under standard designs).

Annuity: pays a regular income against a lump sum; immediate vs deferred, and life annuity vs guaranteed-period variants. Annuity payments are taxed as income from other sources.

Riders (e.g., critical illness, accidental death, waiver of premium) attach to a base policy and cannot be bought standalone; rider premium is eligible for deduction under Sec 80C.

Participating policies share surplus via bonuses: reversionary bonus vests annually, terminal/final additional bonus is paid only at claim or maturity.

Surrender value is payable only after the policy acquires a surrender value (typically after two full years' premiums); paid-up value applies when premiums stop.

Underwriting decides acceptance, rating and terms; the underwriter classifies the risk as standard, substandard (extra premium), or declined/postponed.

Key rating factors: age, gender, sum assured, occupation class, medical history, family history, habits (tobacco/alcohol), build (height-weight), and lifestyle.

Financial underwriting checks insurable interest and income replacement: sum assured is usually capped at a multiple of annual income, adjusted for liabilities and existing cover.

Medical examination thresholds: higher sum assured and older age trigger medicals; tests may include blood profile, ECG, chest X-ray, and HIV/HBsAg screening.

Extra premium methods: flat extra (per mille of sum assured), rated-up age, or lien/exclusion for a defined period.

Moral hazard indicators include non-medical limits exceeded, adverse family history, inconsistent occupation/income, and non-disclosure discovered later.

Reinsurance treaties (quota share, surplus, facultative) determine automatic and manual acceptance limits; cases above retention go to the reinsurer.

Non-disclosure of material facts allows the insurer to repudiate within the contestability period (typically three years from issuance or revival).

Proposal form is the basis of the contract; the proposer's declaration and answers become part of the contract, so accuracy is critical.

Free-look period: 15 days (30 days for distance marketing) from receipt of the policy to return it for a refund of premium less proportionate risk and expenses.

Grace period: 15 days for monthly mode and 30 days for other modes; cover continues during grace, and premiums paid within grace keep the policy in force.

Revival of a lapsed policy is possible within five years of the due date of first unpaid premium, on payment of arrears with interest and evidence of insurability.

Policy servicing includes nomination/assignment changes, address/name changes, mode changes, duplicate policy issuance, and loan against policy.

Premium payment modes: yearly, half-yearly, quarterly, monthly; loading applies to more frequent modes, and instalment premiums are due on fixed dates.

Section 38 and 39 (Insurance Act 1938, as amended) govern assignment and nomination; a policy may be assigned absolutely or conditionally.

Policy lapse occurs when premiums are unpaid beyond grace; paid-up value is the reduced sum assured based on premiums paid, and surrender value applies if acquired.

Claim intimation should be made promptly (usually within 15 days of death) with policy number, date of death, and cause; delay must be justified.

Documents for death claim: claim form, death certificate, policy document, nominee ID, medical/hospital records, and police/FIR reports for accidental or unnatural deaths.

Early claims are those within three years of issuance or revival; these are investigated more thoroughly, including hospital and employer verification.

IRDAI timelines: insurer must settle or reject a claim within 30 days of receipt of all documents; where investigation is needed, within 45 days, and interest is payable for delay beyond that.

Section 45 of the Insurance Act 1938: after three years from issuance or revival, a policy cannot be called in question on grounds of misstatement or non-disclosure.

Claim repudiation grounds include fraud, non-disclosure of material facts within the contestability period, suicide exclusion, and non-payment of premium.

Nominee receives the death benefit; if no valid nomination, the amount goes to the legal heirs under succession law.

Suicide exclusion typically applies in the first 12 months (as per the product's terms); the insurer then refunds premiums paid or a percentage of premiums.

Nomination (Sec 39, Insurance Act 1938): the policyholder nominates a person to receive the policy money on death; the nominee is a trustee for the legal heirs, not an absolute owner.

A nomination can be made at proposal or later, and can be changed or cancelled by the policyholder at any time while the policy is in force.

A nominee may be a minor; the policyholder must appoint an appointee to receive the money on the minor's behalf.

Assignment (Sec 38): transfer of the policyholder's rights to another person, either absolutely (all rights transferred) or conditionally (rights revert on a condition).

Assignment requires notice to the insurer in the prescribed form; the insurer records it, and the assignee becomes entitled to the policy benefits.

Assignment may be made by endorsement on the policy or by a separate instrument; notice to the insurer is essential to bind the insurer.

A policy assigned to a bank as security (conditional assignment) reverts to the policyholder on repayment of the loan.

If a nomination and assignment conflict, the assignee's rights prevail because assignment transfers ownership; nomination only operates on the policyholder's death.

IRDAI was established under the IRDA Act 1999; its mandate includes protecting policyholders, promoting insurance, and regulating the industry.

An insurance agent must hold a valid licence from IRDAI, pass the prescribed examination (IC-38 for life), and complete mandatory training.

Agent licence validity is three years, renewable on application with the required fee and continuing training requirements.

An agent may not represent more than one life insurer and one general insurer at a time; multi-level marketing of policies is prohibited.

Commission and remuneration are governed by IRDAI (Payment of Commission) Regulations; no rebating of commission to the policyholder is permitted.

The IRDAI (Insurance Products) Regulations 2024 and IRDAI (Protection of Policyholders' Interests) Regulations govern product design, disclosures, and grievance handling.

Agents must maintain records of proposals, maintain confidentiality, and disclose conflicts of interest and any financial interest in the sale.

The Insurance Act 1938 and IRDA Act 1999 are the principal statutes; IRDAI issues regulations, circulars, and guidelines under them.

An agent must act in the best interest of the prospect, disclose the nature of the product, and not misrepresent benefits, bonuses, or returns.

Mis-selling includes promising guaranteed returns on ULIPs, concealing charges, or selling policies unsuitable to the prospect's needs and affordability.

The agent must disclose whether they are acting as an agent or as an intermediary, and must not hold out as an insurer or IRDAI representative.

Rebating (sharing commission with the prospect) is prohibited under the Insurance Act; it is a punishable offence and grounds for licence cancellation.

The agent must not induce policy replacement (twisting) without disclosing the disadvantages of surrendering the existing policy.

Confidentiality: personal and medical information collected during underwriting must not be disclosed except as required by law.

The agent must assist at claim time, provide the policy document promptly, and explain the free-look, grace, and revival provisions.

Complaints against an agent go to the insurer's grievance cell and IRDAI; the agent must cooperate with investigations and maintain proper records.

Sec 80C: deduction up to ₹1.5 lakh per year for life insurance premium, subject to the policy being for self/spouse/child and not exceeding 10% of sum assured (20% for pre-2012 policies).

Sec 10(10D): death/maturity proceeds are exempt, except where annual premium exceeds ₹2.5 lakh (₹5 lakh if the only 10(10D) policies) - then the excess becomes taxable as income.

For ULIPs issued on/after 1 Feb 2021 with annual premium above ₹2.5 lakh, gains are taxed like capital gains (Sec 112A at 12.5% LTCG after 1.25 lakh exemption, as per current law).

Annuity income is taxable under 'Income from Other Sources'; no deduction is available for the principal invested in an immediate annuity.

Sec 80D: deduction for health insurance premiums; life insurance premiums are not eligible under 80D.

AML/KYC: insurers must verify identity (PAN/Aadhaar), source of funds, and beneficial ownership; suspicious transactions are reported to FIU-IND.

Cash premiums above ₹10,000 are prohibited; high-value cash transactions and politically exposed persons require enhanced due diligence.

PMLA 2002 applies to insurers; record-keeping of transactions for at least five years and reporting of suspicious transactions are mandatory.

Insurers must appoint a Grievance Redressal Officer (GRO) and display the grievance process and contact details on their website and policy documents.

Complaints must be resolved within 14 days; if unresolved, the complainant may approach IRDAI's Bima Bharosa (formerly IGMS) portal.

If not satisfied, the policyholder may approach the Insurance Ombudsman under the Insurance Ombudsman Rules 2017, within one year of the insurer's rejection.

Ombudsman jurisdiction covers policies up to ₹50 lakh in value; the award is binding on the insurer if accepted by the complainant, and the complainant may still approach a court.

The Consumer Protection Act 2019 provides remedies for deficient service, unfair trade practices, and misleading advertisements; complaints lie before District/State/National Commissions based on value.

Policyholders have the right to information about their policy, to receive the policy document, and to be informed of changes in terms.

Customer service standards: issue policy within a reasonable time after acceptance, acknowledge complaints, and provide a written response.

The IRDAI (Protection of Policyholders' Interests) Regulations mandate disclosure of product features, charges, and the free-look period.

Mortality rate (qx) = deaths in a year / lives at the start of the year; survival rate (px) = 1 − qx.

Net single premium (NSP) = present value of expected death benefits = Σ (dx × benefit) / (1+i)^t, discounted at the pricing interest rate.

Level annual premium = NSP / annuity due factor (present value of ₹1 paid at the start of each year until the policy term).

Human life value (HLV) = present value of future income stream less personal expenses, discounted at a chosen rate; used to size the sum assured.

Needs-based approach: sum assured = income replacement + outstanding liabilities + education/final expenses − existing assets and cover.

Rule of thumb: life cover of 10-15 times annual income, adjusted for age, dependants, and liabilities; younger lives need more cover.

Compounding: FV = PV × (1+r)^n; use this to compare savings products and to estimate retirement corpus needs.

Inflation reduces purchasing power: real return ≈ nominal return − inflation; use this to compare insurance savings with market instruments.

Liquidity, safety, returns, and tax efficiency are the four pillars of financial planning; life insurance addresses protection and, in savings variants, long-term goals.